Wednesday, January 25, 2012

The European Commission announced the proposed revisions to the EU Data Protection Directive today. The widely expected revisions will create uniformity by using a regulation instead of a directive, remove obligations to notify data protection authorities of data processing activities, require data breach notification, increase fines (up to %2 of a company’s global annual turnover), streamline access, introduce a right to be forgotten, expand Binding Corporate Rules to processors, and strengthen the Data Protection Authorities. The Article 29 Working Party also issued a press release supporting the new Regulation.

The proposed regulation on the protection of individuals with regard to the processing of personal data and on the free movement of such data (General Data Protection Regulation) creates a number of changes based on the Data Protection Directive. While some of the provisions, such as the fines and the right to be forgotten, may prove controversial, other provisions relating to removal of the obligation to notify DPAs will likely be celebrated. The Regulation uses some of the same terms as those defined in the Directive 95/46/EC; however, it also introduces new definitions for terms such as personal data breach, genetic data, biometric data, binding corporate rules, and others. The Regulation also clarifies transparency principle, data minimization principle, and the obligation to obtain consent for processing of personal data. The Regulation also introduces more detailed access rights for individuals adding new elements relating to storage periods of personal information, right of rectification and erasure, data portability, and complaint resolution. While these protections are likely to bolster the individual’s control over the personal information held by data controllers and processors, it will likely create additional burdens on data controllers and processors to enable the data subjects to exercise these rights.

The Regulation also introduces new obligations on the data controller and data processors. The Regulation will require privacy by design and default, explicitly introduce the principle of accountability, and clarify the responsibilities of joint controllers. The Regulation states that the data processor may be considered a joint data controller in the event it goes beyond the scope of data controller’s instructions. This particular provision appears to be a result of the concerns the Article 29 Working Party had over processors such as SWIFT. The Regulation will also explicitly require the cooperation of both the data controller and the data processor with the Data Protection Authorities. The security obligations of the data controller include the obligation to notify the data subject of the breach of personal data. Currently, that proposal includes a “where feasible, not later than 24 hours after having become aware” provision. This provision is likely to be revised before the Regulation becomes law to a more reasonable time frame.

The Regulation makes the Data Protection Officer mandatory for the public sector, where processing is carried out by more than 250 people, and where the core activities of the controller or the processor consist of operations that require systemic monitoring of data subjects. German Data Protection law provided such detailed requirements for the Data Protection Officer. Previously, the creation of such a position decreased the administrative burden on the data controllers and their obligation to notify the Data Protection Authorities with the processing of personal information. This approach is likely to continue with the new Regulation.

The Regulation also includes further details regarding international data transfers. It specifically mentions Binding Corporate Rules. These rules now specifically refer to a data processor’s, as well as a data controller’s, ability to obtain authorization for Binding Corporate Rules. This provision should allow service providers to obtain authorizations for BCRs and transfer personal information internationally without having to rely on Standard Contractual Clauses. However, the time and resources required to obtain authorizations for these BCRs may still be substantial. Considering that the Regulation may take some time, as long as a couple of years, to become law, we may not find out about this process for a while. Finally, the Regulation creates the European Data Protection Board that replaces the Article 29 Working Party. This Board is to ensure the consistent application of the Regulation, review guidelines, recommendations and best practices, and issue opinions, among other responsibilities.

The Regulation comes with both advantages and disadvantages compared to the current regime in place in the EU. On the one hand, the Regulation will likely foster a more uniform approach to data protection in the EU. Once the Regulation becomes law, member states will not be required to transpose it into national law. This will reduce the local differences in the substance of the law. However, the Regulation still provides for independent Data Protection Authorities. These DPAs will ultimately have different interpretations of the Regulation and as it interacts with local law and culture. However, the European Data Protection Board will hopefully have the effect of creating more uniformity. Many will likely celebrate the end of the notification of DPAs regarding the processing of personal information. These registers of personal information were mostly automated, reviewed by few, yet required the time and resources of many corporations. Their departure will allow the DPAs and the corporations to work on more substantive privacy and data protection issues. Assuming that the BCR process is further streamlined, then we can see more companies and services providers getting in line to obtain authorizations. On the other hand, the right to be forgotten, the increased fines, and the restrictions on the legal basis for processing of personal information will likely draw criticism. Hopefully, in the coming years, the Regulation will be revised to better balance some of the obligations on data controllers.

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